Startup financing can be hard to get

May 11, 2008|By BOB POOR

Q: My brother and I are planning to start a small business and are looking for startup financing. Is SCORE able to provide assistance with federal or state grants?

A: Nothing good in life comes easy, and that includes getting financing for your small business. Despite what you might have heard, no federal government agency - including the Small Business Administration - offers grants to start or expand small businesses. Most foundations, corporations and private institutions that sponsor grant programs follow the same policy, except in cases where the business involves development of a new technology or is a nonprofit organization.

The SBA does administer several loan programs in partnership with local lenders, community development organizations and micro-lending institutions (agencies that specialize in limited, short-term financing). SBA backs those loans with a guarantee against nonpayment that eliminates some of the partner's risk. In other words, your application for an SBA-backed loan actually is an application for a commercial loan structured according to the SBA's requirements.

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SBA loan programs include the basic 7(a) program, "504" loans, which are delivered through Certified Development Companies (CDCs) for acquiring real estate, machinery or equipment as part of an expansion or modernization; 7(m) micro-loans of up to $35,000; and post-disaster recovery and assistance loans. Complete details on these programs and their application requirements are available under the Services section of www.sba.gov.

Depending on where you live, your small business might be eligible for assistance from state and local economic development agencies. Most often, the assistance takes the form of work space, training and administrative support for startups; reduced rates on existing office or production space; and tax incentives. Others sponsor micro-loan programs for specific business types such as child care and firms that locate in or support designated enterprise zones.

For additional information on grants for established small businesses, go to grants.gov, a central storehouse of information on more than 1,000 grant programs from 26 federal agencies. Another source for researching potential grant opportunities is The Foundation Center's Foundation Directory Online at fconline.fdncenter.org. This subscription service offers access to a directory of more than 80,000 grant makers.

For more assistance with creating a financing strategy for your new or growing small business, contact SCORE at 301-739-2015, ext. 103, or at www.scorehagerstown.org. SCORE is a nonprofit organization of small business volunteer counselors who provide free, confidential business counseling and training workshops to small business owners and those thinking of a small business startup.

Robert A. "Bob" Poor is education director of the local SCORE chapter, a small-business counselor and a regular contributor to the Ask SCORE column. Questions may be e-mailed to him at r.poor@myactv.net or by mail in care of The Herald-Mail, P.O. Box 439, Hagerstown, MD 21741, ATTN: Ask SCORE column. The Ask SCORE column appears monthly in this newspaper's Money Section, every second Sunday of the month.